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Google’s stock price closed yesterday at $291, the first time it has dropped below $300 since 2005. It’s 44% off of its 52-week high of $725. Most analysts think its cheap and getting cheaper – the average price target is still over $500. Former analyst Henry Blodget, however, thinks it could fall to $200 (I prefer the bullish version of Blodget myself).

One analyst we track closely, Mark Mahaney of Citigroup, was bullish on the stock a month ago. On October 13, he issued a report that had a price target of $590 based on then current data. He noted that Google was the market leader in “the most dynamic part of Internet advertising – search,” and was rosy on video and display advertising growth opportunities.

Yesterday, however, Mahaney issued a new report, dropping the target price to $450.

What changed? It wasn’t the loss of the Yahoo advertising deal, which analysts had discounted well before Google walked away. No, what’s changed is the economic outlook, which has deteriorated more than most of us know.

Mahaney, like all analysts, talk to as many direct sources as he can. Every quarter Mahaney checks with search marketing executives to get their outlook for the coming quarter. In October the signs were mixed. Advertising spend in the financial, retail, travel and housing verticals was weak, but pharma, CPG, entertainment and technology was strong.

A month later Mahaney, notes in his report that we are going into “almost surely the worst economic environment in our collective lifetimes.” And the tone of the messages from search marketers has changed dramatically. He says “We didn’t uncover a single source that thought business trends were going to improve in the foreseeable future” and “Search marketers almost universally expect this Q4 to be the weakest they have ever experienced.”

Depressing stuff. And worst of all, it’s not just display ads that are being cut for non-performance. The downturn is starting to affect search spend as well, which is universally considered to be the most secure form of online advertising: “one of the savviest marketing executives we have come across, noted that almost all of his marketing budgets are being cut, with even his Search budget being severely scrutinized for the first time.”

The scary thing is that we’re talking about Google, which has the ability to withstand just about anything the economy can throw at it right now. But that’s not the case for the rest of the Internet, even the public companies. Google is sneezing, but everyone else just got the flu.

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CrunchBase

OverviewGoogle is a multinational corporation that is specialized in internet-related services and products. The company’s product portfolio includes Google Search, which provides users with access to information online; Knowledge Graph that allows to search for things, people, or places as well as builds systems recognizing speech and understanding natural language; Google Now, which provides information …